Berkshire Hathaway 2005 Annual Report Download - page 40

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39
(8) Goodwill
A reconciliation of the change in the carrying value of goodwill for 2005 and 2004 is as follows (in millions).
2005 2004
Balance at beginning of year ......................................................................................................... $23,012 $22,948
Acquisitions of businesses and other............................................................................................. 632 64
Balance at end of year ................................................................................................................... $23,644 $23,012
(9) Inventories
Inventories are comprised of the following (in millions):
December 31, December 31,
2005 2004
Raw materials................................................................................................................... $ 657 $ 527
Work in progress and other.............................................................................................. 271 256
Finished manufactured goods .......................................................................................... 1,217 1,201
Purchased goods............................................................................................................... 1,998 1,858
$ 4,143 $ 3,842
(10) Property, plant and equipment
Property, plant and equipment is comprised of the following (in millions):
Ranges of December 31, December 31,
estimated useful life 2005 2004
Land..................................................................................... — $ 361 $ 312
Buildings and improvements .............................................. 10 – 40 years 2,623 2,525
Machinery and equipment................................................... 3 – 20 years 6,774 5,763
Furniture, fixtures and other................................................ 3 – 20 years 1,649 1,332
11,407 9,932
Accumulated depreciation .................................................. (3,907) (3,416)
$ 7,500 $ 6,516
(11) Derivatives
A summary of the fair value and gross notional value of open derivative contracts follows. Amounts are in millions.
December 31, 2005 December 31, 2004
Notional Notional
Assets Liabilities Value Assets Liabilities Value
Foreign currency forwards ...................................
.
$ 12 $ 243 $13,760 $ 1,767 $ 6 $ 21,445
Interest rate, credit and foreign currency swaps ...
.
977 3,142 43,941 6,043 7,651 153,185
Equity options ......................................................
.
35 1,592 14,488 69 380 4,626
Foreign currency options......................................
.
117 241 2,072 343 352 6,083
Interest rate options..............................................
.
164 347 12,033 500 893 28,961
1,305 5,565 8,722 9,282
Adjustment for counterparty netting ....................
.
(504) (504) (4,488) (4,488)
Derivative contract assets and liabilities ..............
.
$ 801 $ 5,061 $ 4,234 $ 4,794
Berkshire utilizes derivatives in order to manage certain economic risks of its businesses as well as to assume specified
amounts of market and credit risk from others. The contracts summarized in the preceding table, with limited exceptions, are not
designated as hedges for financial reporting purposes. Changes in the fair values of derivative assets and derivative liabilities that do
not qualify as hedges are reported in the Consolidated Statements of Earnings as derivative gains/losses. In 2002, Berkshire began to
enter into foreign currency forward contracts with the objective of partially managing corporate-wide adverse risk from the decline in
the value of the U.S. Dollar. Berkshire has also written equity index options and credit default swap contracts during the last two
years.
Since January 2002, the operations of General Re Securities (“GRS”) have been in run-off. As of December 31, 2005,
approximately 95% of GRS’ s derivative risks (as measured by the gross notional value) that existed as of the commencement of the
run-off have been liquidated. The run-off is expected to continue over several more years, however, management believes that the
remaining exposures are not material.